The central bank should pause its double-barreled blitz of higher interest rates and tighter liquidity.

Around Oct. 1, global central-bank liquidity reversed and stocks began their descent from peak prices. That is no coincidence. The Federal Reserve should take an important signal from recent developments at its meeting this week.

The Fed created quantitative easing as a novel crisis-response tool a decade ago. It bought assets from the public and stocked them away for safekeeping. Market participants understood the not-so-subtle message: The Fed had investors’ backs. The stock market rallied. The cost of credit fell. And the...